Mboweni bids farewell to Reserve Bank

Outspoken South African Reserve Bank Governor Tito Mboweni bids farewell to the bank this weekend after a decade fighting inflation in a jovial and personable style rare amongst central bankers.

Asked repeatedly what he plans to do next—the private sector, politics and the foreign service had all been mooted—Mboweni says the only certainty is fly-fishing, his favourite sport.

Mboweni has his critics—the photographers who he regularly banned from press conferences and the trade unions that blame him for job losses—but analysts point to many successes during his tenure.

Had food and oil prices not ignited inflation in 2007 and 2008, sparking interest-rate hikes, and the economy not been dragged into recession by the global crisis this year, the trade unions may well have liked him too.

The former labour minister, who spent a year as an adviser at the central bank before taking over the top job, says inflation-targeting and building the country’s reserves from the negative position he inherited are the highlights of his 10 years in charge.

He also introduced the monetary policy committee (MPC) that brought in transparency to interest -ate decisions, replacing the previous format that saw decisions often relayed, unannounced, late on Friday.

“He must be credited for establishing the MPC, which has been a huge plus, the transparency has been enormously positive in signalling which way interest rates were going to go,” said Colen Garrow, economist at financial service group Brait, adding the credibility of policies was never in question.

“He said he was winding down the forward book and did it, he said he would not use reserves to protect the rand against speculative attacks, and he did not.”

The Reserve Bank racked up more than $20-billion in losses on its forward book during the late 1990s trying, largely in vain, to protect the rand.

Under Mboweni, the bank reached a positive reserves position in 2004 and since then has built holdings to just under $40-billion.

‘They were friendly’
Inflation remained in the target band for much of his tenure, until 2007 when food and oil prices ignited prices globally, and the country enjoyed its longest period of economic growth—a decade until the end of last year.

Successor Gill Marcus, who officially takes over on Monday, will be hard pressed to guard the central bank’s independence as vehemently, and successfully, as he did.

The Congress of South African Trade Unions wants to rein in the bank’s powers. It wants to force the bank to ease a fairly strict mandate to target inflation that it claims has hurt the poor, and has even called for the bank to be nationalised.

Cosatu’s attack became personal this year, although Mboweni rebuffed the vitriol, attending its convention within hours of the policy committee refusing demands for another interest rate cut.

“After the MPC meeting I went to the Cosatu conference [and] I was told there was a lot of criticism, but they were friendly. I enjoyed myself,” Mboweni said at the time.

Another criticism was for sometimes surprising rate decisions.

In June last year he was quoted as saying rates could go up 200 basis points but then kept to the usual half percentage point increase.
Mboweni said his comment was misunderstood.

“As much as the SARB had a clear message about their overall policy intentions, the rate cuts in 2004 and 2005 took many by surprise, as did many other decisions,” Razia Khan, head of Africa research at Standard Chartered, said.

Mboweni’s contribution was important, she said, starting at a crucial turning point in the country’s economic transition, he soon reinforced the market-friendly nature of South African policy.

“But importantly, as an ANC insider, a former labour minister, he was viewed as holding some authority when it came to dealing with opposition to inflation targeting from the unions,” Khan said.

“Markets will remember him fondly for other reasons too ... his colourful manner of describing things and his charisma livened up an otherwise dull arena of central banking.”

At only 50 years old, Mboweni is unlikely to disappear from public life for long, and is bound to resurface somewhere after a cooling off period in which he will still be paid.

Mboweni says he may agree to some of the numerous offers to lecture at universities across the country, in between fishing trips.—Reuters

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